Amazon was a challenge for Apple. They had no official relationship other than for accessories, but the gray market did, which leads to a brand representation quandary for Apple (it was always possible to get a Mac or an iPad on Amazon, but you had no assurance of warranty, product quality, whether it actually came direct/new from Apple, etc.). The Apple of yore probably would've gone the sand-pounding, legal-war-of-attrition route to try and quash out the gray marketers (good luck with that). But Cook is a practical man and likely saw an opportunity to instead cut a deal to make Amazon, and its massive base of shoppers, an AARP with the condition that they turn the screws on the gray market sellers which they seemed only more than willing to do. Apple can now use Amazon as a convenient inventory management tool (if you watch carefully, you'll see Amazon often discounts specific colors or configurations of items more heavily than others, probably as a result of Apple backing up a semi load of that particular item to an Amazon warehouse somewhere—poof! Over-supply gone) without harming their golden-lily retail brand. Because the only people who should be paying full-price at an actual Apple Store are those who either don't know that it's cheaper elsewhere (neophytes for whom the Apple Store was designed), or don't care (the horsed-class customers who want whatever it is right now).

It also has the effect of further driving out of business the small, independent AARPs which Apple has never really liked anyway, if we're totally honest about it. Meanwhile, the rest of us get a deal on an iPad while also ordering cat food.

Which reminds me, I think I sold my original iPad on Amazon way back through their fulfillment. Pretty sure that's not possible anymore, unless I carry like $1M in inventory or something according to that article about it on the last page.

to put that in perspective, even with the decline, they are still #1 in marketshare. That said, I'm sure the news that with the iPhone 6 (sold in India as of Feb 2019) is no longer supported by future iOS versions didn't help sales. Talk about a punch in the gut for those who bought that phone this year.

How much of the Indian market has disposable incomes comparable to say Americans who make high 5-figures or over 6 figures?

In China, there are hundreds of millions who fall into that range and even those who don't may stretch for a big purchase for "name" or aspirational products.

Does India have similar market behavior? Or will they just go for the $99 or even cheaper phones?

Also the Indian consumers who want an iPhone badly enough may be able to get it from neighboring countries? Or maybe they will even go to expensive places like Hong Kong or Singapore, either buy there in person or have it imported. But that would be a tiny number relatively speaking.

to put that in perspective, even with the decline, they are still #1 in marketshare. That said, I'm sure the news that with the iPhone 6 (sold in India as of Feb 2019) is no longer supported by future iOS versions didn't help sales. Talk about a punch in the gut for those who bought that phone this year.

They're not close to #1 in marketshare! That's 1% marketshare. Apple, suffice it to say, has not been able to crack India. I expect they won't, at least until more of a middle class with disposable income develops, by which time it may be too late.

They're not close to #1 in marketshare! That's 1% marketshare. Apple, suffice it to say, has not been able to crack India. I expect they won't, at least until more of a middle class with disposable income develops, by which time it may be too late.

How much of the Indian market has disposable incomes comparable to say Americans who make high 5-figures or over 6 figures?

In China, there are hundreds of millions who fall into that range and even those who don't may stretch for a big purchase for "name" or aspirational products..

That's somewhat beside the point since the issue is the relative growth or decrease. In this case a decrease of 42% YoY.

As China demonstrated a small percentage of relatively well off people is still a good market. There is definitely a middle class and richer group in India even if perhaps a much smaller percentage of the population. But when the population is so large, that small market is still in absolute terms rather large. What ought worry Apple is that not only are they not growing their market but they've significantly shrunk it - most likely due to the high costs of the Xs and Xr.

What ought worry Apple is that not only are they not growing their market but they've significantly shrunk it - most likely due to the high costs of the Xs and Xr.

At the same time that the Indian market is growing and moving up market.

It's not growing that fast, is it? I don't know much about India, but I've heard that for those in the sufficient income bracket to really afford Apple products the number really isn't that large. Maybe a few million top. But that leads to Android being more attractive even to those with the income.

That's a really interesting link. I've already passed it along to several people. Although according to the article the premium market ($500+) is only 3% of the smartphone market which itself was listed as 142 million. So that's around 4 million or close to what I said. Further what I mentioned matters. When the premium market is only 3% and the rest of the market is Anrdoid, that makes it very hard to compete particularly if there are Android only services.

How much of the Indian market has disposable incomes comparable to say Americans who make high 5-figures or over 6 figures?

In China, there are hundreds of millions who fall into that range and even those who don't may stretch for a big purchase for "name" or aspirational products..

That's somewhat beside the point since the issue is the relative growth or decrease. In this case a decrease of 42% YoY.

As China demonstrated a small percentage of relatively well off people is still a good market. There is definitely a middle class and richer group in India even if perhaps a much smaller percentage of the population. But when the population is so large, that small market is still in absolute terms rather large. What ought worry Apple is that not only are they not growing their market but they've significantly shrunk it - most likely due to the high costs of the Xs and Xr.

China and India have roughly comparable populations, but China's nominal GDP/capita is 4.5x that of India, despite them coming from parity in 1990/1991.

I made my first trip to India a year ago, visiting Hyderabad, Bangalore, Delhi, and Mumbai over a span of 2.5 weeks, and I like to walk through cities and people-watch. I've also spent a fair amount of time in Chinese cities. So I haven't seen any rural areas, but I've seen a decent cross-section of urban folk in both places.

As of 2018, iPhones in Indian cities are somewhere between Porsches and Ferraris in the U.S. They're a sign of pretty conspicuous consumption, and out of reach of most people. They're not like unicorns, and you do seem them with some frequency in the commercial districts of Mumbai, etc., but you won't see any on the subway.

In China they're at about the position of the Mercedes/BMW/Audi in the U.S. Not the most common choice, but definitely popular amongst the affluent youth, well-employed, etc., and you'll see them on the subways.

You know, I think it actually may be healthy for Apple for the % of revenue/profit derived from the iPhone to be going down (though there's always a danger wrt services and user experience - there's now a component of user experience you have to pay for annually). Too many eggs in one basket otherwise. At the least, Apple seems to be handling the post-peak-iPhone (presumably) transition fairly well.

You know, I think it actually may be healthy for Apple for the % of revenue/profit derived from the iPhone to be going down (though there's always a danger wrt services and user experience - there's now a component of user experience you have to pay for annually). Too many eggs in one basket otherwise. At the least, Apple seems to be handling the post-peak-iPhone (presumably) transition fairly well.

It's healthy if the re-shuffling of percentages occurs in an orderly, controlled, smooth fashion, which appears to be happening. That the iPhone's decent from the stratosphere appears to be a (mostly) gentle glide is a huge gift to Apple and its investors.

Still: Q3 2018 iPhone revenue was $29.9B. Q3 2019 is $26B. That's not a small drop. I'll be curious if Apple approaches either the release or the marketing of the 2019 iPhones any differently than in the past as a result. This breathless, yearly release cycle is probably going to eventually go away, and I'm not sure that's a bad thing.

Those services, tho. I mean, it's pretty clear the broader market of Apple customers has no problem with subscription services, software, or otherwise. Nor should they, it's clearly where the market is headed.

Still: Q3 2018 iPhone revenue was $29.9B. Q3 2019 is $26B. That's not a small drop. I'll be curious if Apple approaches either the release or the marketing of the 2019 iPhones any differently than in the past as a result. This breathless, yearly release cycle is probably going to eventually go away, and I'm not sure that's a bad thing.

Changing the release cycle would probably make the problem worse. The underlying cause is that the rate of marginal improvement is down. There are improvements but just nothing like what once was happening year over year. The upgrade cycle is therefor approaching the Mac or iPad. Throw in that there are no longer large markets to enter in and it's hardly surprising growth is negative.

My guess is that this puts more pressure on Apple for newer products. The Watch, while not huge, still is in that rapid upgrade cycle period and still has a lot of people without one who probably might one day want one. Likewise they've been doing interesting things in headphone space with the AirPods and Beats Pro. We're hearing a lot about services, but honestly I expect that will go much worse for them. They really need new products in their core competency.

We're hearing a lot about services, but honestly I expect that will go much worse for them.

(emphasis added)

How so? I mean, I keep waiting for Apple to take one in the teeth with services because I don't personally see the value in Apple's services offerings versus their competitors (with the exception of my $2.99 recurring charge for more iCloud space since iCloud Photo Library is genuinely slick and functional). But plenty of people seem to feel differently to keep that wedge of the pie growing. Or are you saying that if Apple neglects creating new, big, "sticky" hardware offerings that the appeal of services will begin to wane? Maybe! ApplePay in particular stands to suffer if the iPhone takes a real tumble.

That credit card will be a home run. Both with the headlines and with some additional services revenues. Then when they are using their own processors, that will also greatly help profits enough to lower prices and still maintain healthy margins.

While I'm picking through the numbers: iPad revenue up $365M over Q3 2018. What's the consensus on that? I still have zero love or interest for the iPad as a product, but growth is growth and my bad attitude can't take that away from Apple. But that's... not a lot of growth. It looks like if Apple wants the iPad to capture a more dominant slice of their devices revenue, it's not going to come easily. But at least the overall ecosystem has stabilized from where it was a year or two ago.

Still: Q3 2018 iPhone revenue was $29.9B. Q3 2019 is $26B. That's not a small drop. I'll be curious if Apple approaches either the release or the marketing of the 2019 iPhones any differently than in the past as a result. This breathless, yearly release cycle is probably going to eventually go away, and I'm not sure that's a bad thing.

Changing the release cycle would probably make the problem worse. The underlying cause is that the rate of marginal improvement is down. There are improvements but just nothing like what once was happening year over year. The upgrade cycle is therefor approaching the Mac or iPad. Throw in that there are no longer large markets to enter in and it's hardly surprising growth is negative.

My guess is that this puts more pressure on Apple for newer products. The Watch, while not huge, still is in that rapid upgrade cycle period and still has a lot of people without one who probably might one day want one. Likewise they've been doing interesting things in headphone space with the AirPods and Beats Pro. We're hearing a lot about services, but honestly I expect that will go much worse for them. They really need new products in their core competency.

It's not just that the marginal rate of improvement is down, it's also that Apple is deliberately targeting a longer lifespan. Is an iPhone 8 really in need of replacement? In most cases no. That was supposed to be made up in two ways:1) Higher ASP of phones2) Shift to service/accessory revenues.

For the most part we've seen both of those. And Apple has been telegraphing that for some time now. In a lot of ways, Apple's segments are a little misleading. If I choose to buy a pair of Airpods and wait another year to upgrade my phone, is that a problem? Yes, in that the Airpods revenue is in a different segment from the iPhone revenue and 'oh no, iPhone is doomed' but as far as I'm concerned, it's just an extension of the iPhone. Same with Watch, etc.

As for iPad, I'm sitting next to a nice 12" Pro w/Pencil and it's fantastic. Huge benefits over my old Air 2. It's much more of a productivity machine and a better companion to my Mac for much of what I do. So, I think their shift from an upscaled iPhone into a proper computer replacement is working.

I don't see any huge breakouts for Apple in the near term. They're holding well, expanding the ecosystem, retaining customers, poking in some new areas. The thing that would get me to pick up an Apple credit card is if the iPhone Upgrade program could be done entirely within the card (no 3rd party lending) at the same price and convenience. I wouldn't want it at the card rates, but as a bolt-on loan that's simply serviced through the card interface. That'd be pretty huge.

While I'm picking through the numbers: iPad revenue up $365M over Q3 2018. What's the consensus on that? I still have zero love or interest for the iPad as a product, but growth is growth and my bad attitude can't take that away from Apple. But that's... not a lot of growth. It looks like if Apple wants the iPad to capture a more dominant slice of their devices revenue, it's not going to come easily. But at least the overall ecosystem has stabilized from where it was a year or two ago.

Beyond the lowest priced denominators of eBook readers, video players, and child pacifiers, tablets are a tough business. Google seems to have more or less given up, and Chromebooks are a better fit for a company that excels in information services on cheap hardware. Microsoft has put in considerable effort for almost no gain, probably not even a tenth as many Surface Pro and Surface Go tablets sold each year compared to the iPad. Apple, still selling 40 to 45 million per year, starting at $329, is the only company to have any real success, but why not more?

The vast majority of consumers using laptops aren't doing anything on a laptop they couldn't do on a tablet, but my guess is it's just not what they are used to. I find it amusing when Apple influencers like John Gruber become confused and angry that the iPad doesn't act like a Mac, how much more so is that for the average consumers compared to a technology enthusiast? The iPad works best for people who become confused by the complexity of traditional computers (old people), people who do not have years of experience with traditional computers (young people), and forward looking individuals not shackled to their preconceived notions on what a computer is (right thinking people like me). Tough to make headway when part of your demographic is dying, part aren't adults with jobs, and the rest are wearing camel hair and crying out from the wilderness.

We tend to be all in on Apple Kit due to the level of integration we get out of them. Including services. Family Plan, Apple Match, Continuity, 200GB iCloud Storage, Apple News+ (not Apple Music though). I'll probably get an Apple Card as well since that 3% back on Apple purchases adds up at the higher values.

For someone like us, and the diverse array of Apple devices - Apple Services provides a lot of benefit.

Anecdotal: I have a good friend that didn't have any Apple devices at all. Ended up getting an iPad, then multiple iPads for the family, then AppleTVs (including one fo the Intel ones that's still running), the iPhone. Now his main system is an MBP and he just got a watch. Something he said as he got into the ecosystem was that he was continual surprised at the level of integration between the devices. He said the level of integration and the gateway to service is what eventually hooked him - you just had to get to a critical mass to see that level of integration. This is a smart guy that admins Windows and Linux systems all day at work.

We also have Synology's and a couple of Windows systems (one full time on one of the above Mac minis).

While I'm picking through the numbers: iPad revenue up $365M over Q3 2018. What's the consensus on that? I still have zero love or interest for the iPad as a product, but growth is growth and my bad attitude can't take that away from Apple. But that's... not a lot of growth. It looks like if Apple wants the iPad to capture a more dominant slice of their devices revenue, it's not going to come easily. But at least the overall ecosystem has stabilized from where it was a year or two ago.

After the early explosive growth I think the big thing with the iPad is what the user base is at this point (playing into the whole ecosystem/services thing). It seems like a common thing they’ve been saying in the conference calls is the amount of new users, and new users in whatever foreign regions. They’re...good enough hardware wise at this point I could see them just kinda settling into slow growth at this point, slowly building up as users need to upgrade eventually.

How so? I mean, I keep waiting for Apple to take one in the teeth with services because I don't personally see the value in Apple's services offerings versus their competitors (with the exception of my $2.99 recurring charge for more iCloud space since iCloud Photo Library is genuinely slick and functional). But plenty of people seem to feel differently to keep that wedge of the pie growing. Or are you saying that if Apple neglects creating new, big, "sticky" hardware offerings that the appeal of services will begin to wane? Maybe! ApplePay in particular stands to suffer if the iPhone takes a real tumble.

Depends upon the service. Several of them they've frankly botched such as News. While I'm excited about some of their show offerings, let's be honest Disney is going to dominant that space and it'll be a fight between Apple, Netflix and Amazon for the trailings. (We'll see how well CBS/WB do as they have a solid catalog)

I think iCloud is a solid service as is Music. But I think there's limits there. I pay for them but are they going to be a high growth area? Probably not. Music is the strongest element. If they're smart and think longer term they'll have an all in one service that's compelling. But I rather doubt that's in Apple's DNA. So that means modest growth/revenue for Music while News and TV bomb and iCloud has very modest growth.

Contrast this with a new device that goes for $400-$1000 that everyone wants. I know people keep saying Apple can't do that, but honestly the Watch is pretty close to that and is doing great. They also are selling a lot of Beats/AirPods to people. HomePod was a disaster but I think it part that's because they didn't have associated cheap pucks to put around the house where you don't need very good music. Also Siri still has its issues.

While I'm picking through the numbers: iPad revenue up $365M over Q3 2018. What's the consensus on that? I still have zero love or interest for the iPad as a product, but growth is growth and my bad attitude can't take that away from Apple. But that's... not a lot of growth. It looks like if Apple wants the iPad to capture a more dominant slice of their devices revenue, it's not going to come easily. But at least the overall ecosystem has stabilized from where it was a year or two ago.

After the early explosive growth I think the big thing with the iPad is what the user base is at this point (playing into the whole ecosystem/services thing). It seems like a common thing they’ve been saying in the conference calls is the amount of new users, and new users in whatever foreign regions. They’re...good enough hardware wise at this point I could see them just kinda settling into slow growth at this point, slowly building up as users need to upgrade eventually.

An important metric of growth is new customers. During the conference call it was stated that customers new to their respective platforms were:

75 percent of Apple Watch buyers

More than half of iPad buyers

Slightly less than half of Mac buyers

No mention of new iPhone buyers, though installed base reached a new high

Clearly, the iPhone has reached a saturation point, only so many people on the planet willing to pay around $1,000 for a handheld computer. Whether Apple is cool with that or moving towards a price point of $750 at the top end will play out over the next year or two, I think. It's still early days for the watch, especially if it becomes available to the sad world of Android wearables.

This is the first quarter I can recall the Mac not having half of customers new to the platform ever, not sure what that means, probably nothing. However, the Mac is fighting against both declining sales of laptops and desktops as a trend and Apple positioning the iPad as the "computer for the rest of us," so to speak. The question remains unanswered whether consumers can be convinced. I wouldn't bet either way today.

Not quite sure where to put this, but the Xbox cocreator Nat Brown now works at Apple. That suggests more focus by Apple on gaming. That doesn't mean they're going to solve the problems mind you. This could also be tied to Apple's AR/VR ambitions given that his most recent job was doing VR at Valve.

While most seem to think this is tied to AR glasses I'm hoping this is more tied to making the iPad and AppleTV better gaming platforms. I've not been shy about my heavy, heavy skepticism about AR and VR except in pretty narrow niche services. (An AR automobile screen would be quite interesting were it not for the problem of rock chips and how much even those reflective screens add to the price of replacing your front window)

This is the first quarter I can recall the Mac not having half of customers new to the platform ever, not sure what that means, probably nothing. However, the Mac is fighting against both declining sales of laptops and desktops as a trend and Apple positioning the iPad as the "computer for the rest of us," so to speak. The question remains unanswered whether consumers can be convinced. I wouldn't bet either way today.

I expect this shows that the overall customer base for laptops is pretty static.

Maybe someone could clear this up. Doesn't the weaker Chinese currency offset the tariffs thereby helping AAPL? Perhaps this means things are only heating up and not moving to a resolution.

Apple's China revenue is about 20% of all sales. (I think, might be of all iPhone sales.) Higher dollar means products become more expensive to China consumers. While it also means component costs are less, sadly not that many components are exclusively sourced in China.The upshot is that a weaker Yuan means weaker sales in China and less revenue over all.

Also, just in general, an escalating trade war creates both uncertainty for Apple and overall global uncertainty/instability overall (or at least increased risk of such), which is.... bad.

Yes, uncertainty in some ways is much worse than a predictable increase in costs. I suspect this also will increase the probability of a recession here in the US as well. You can't have a rapid inflation of most prices without a corresponding effect on the economy here. But I'll avoid getting political here. Still this makes it difficult for lots of companies. We're getting my business' orders for machinery out of China just barely before the deadline. The cost difference was pretty huge.